Can Chapter 13 Bankruptcy Affect Your Tax Returns?

  • Chapter 13 Bankruptcy

Can Chapter 13 Bankruptcy Affect Your Tax Returns?

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Despite bankruptcy getting rid of the majority of your debts, you are still required to file a federal tax return with IRS. With chapter 13 bankruptcy, individuals and small business owners can repay their creditors through a repayment plan. However, before filing for bankruptcy, all tax returns for the past 4 years must have been filed before the 341 meetings. Additionally, all current and applicable local, state and federal taxes due either during or after bankruptcy should also be filed. If you fail to pay current taxes or file tax returns, Dallas based bankruptcy law firm Recovery Law Group say, your bankruptcy case will be dismissed.

Any debts canceled as a result of bankruptcy should not be included while filing tax returns. Any loss of property as a result of canceled debt should be included in tax returns. Since trust accounts are not taxable any interest in them should not be included while filing your taxes. You might receive tax refunds during the bankruptcy process; however, they can be used to pay your tax debts. On completion of your chapter 13 bankruptcy repayment plan, some federal tax debt might be discharged. Experienced bankruptcy lawyers can help you with differentiating which debts can be discharged. You can consult with bankruptcy attorneys at 888-297-6023 to discuss your case.

Moreover, income from social security, any repartitions for war crimes or terrorist acts are not included as monthly income. Your monthly income, so calculated, is then compared with state median income for a household of similar size. In case the monthly income is higher, means test is used to check whether you can pay debts after allowable deductions.